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Irwindale City Councilman Mark Breceda, left, and former Irwindale City Councilwoman Rosemary Ramirez, second from right, appear to face charges of misappropriation of public funds at the Criminal Courts building in downtown Los Angeles on Wednesday, Oct. 27, 2010. Blancarte , Ramirez, Irwindale City Councilman Mark Breceda, and Finance Director Abe De Dios, were charged with misappropriation of public funds. Genaro Molina/AP

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This story has been changed from an earlier version to correct that the charges against the Irwindale officials were thrown out. They have not been convicted.

A state appeals court panel Thursday threw out embezzlement charges against two Irwindale city councilmen and two former city officials, finding that the District Attorney's Office withheld "exculpatory'' evidence from the grand jury that indicted the four in December 2011, according to City News Service.

The three-justice panel from California's 2nd District Court of Appeal found that Councilmen Mark Breceda and Manuel Garcia, former Councilwoman Rosemary Ramirez and former Finance Director Abe De Dios were “substantially prejudiced by the failure of the prosecution to provide two significant documents” to the grand jury.

“There was simply insufficient evidence across the board to show that our clients intended to embezzle money from the city,” said Breceda's attorney, Anthony Falangetti. “I'm hoping they will not re-file or re-indict.”

Deputy District Attorney Max Huntsman described the ruling as “a setback only.”

“Our office will consider our options, our appellate options, as well as re-filing or re-indicting,” the prosecutor said.

Breceda and De Dios were indicted on Dec. 12, 2011, on five counts each of embezzlement of public funds, while Ramirez and Garcia were indicted on one count each of embezzlement of public funds. Ramirez also was indicted on a charge of dissuading a witness from testifying – on which the appellate court panel expressed “no opinion.”

Defense attorneys had challenged the indictment, arguing that the documents should have been provided to the grand jury.

“This evidence consists of two Irwindale documents, a 2002 resolutionand a 2002 city manager memorandum, which appear to state a policy, or – atleast – a practice that each Irwindale official is entitled to a daily $75 allotment while traveling on city business, even if that official's meals were paid for by a third party,” Associate Justice Jeffrey W. Johnson wrote, with Presiding Justice Robert M. Mallano and Associate Justice Victoria Gerrard Chaney concurring in the panel's 30-page ruling.

The appellate court justices noted that Huntsman and colleague Susan Schwartz –who went before the grand jury in connection with the case – were not aware of the documents, although the District Attorney's Office was.

“The knowledge, or lack of knowledge, of the two deputies is of no moment,” the appellate court panel found in the 30-page ruling vacating the embezzlement charges. “It is the duty of the office of the district attorney to gather all the information made available throughout the office and present that information to the grand jury. The grand jury, not the prosecutor, has the duty to sift through the evidence and weight it to come to a fully informed conclusion.”

The justices also found that the prosecution's presentation to the grand jury “provided some evidence that city funds were used to reimburse the third-party financial consultants who hosted those trips, the evidence before the grand jury that Breceda, Garcia and Ramirez knew of such reimbursements, and thus arguably had a fraudulent intent to deceive, was scarce, if not absent.”

The justices added in the ruling: “While we agree that the petitioners' profligate use of their positions to obtain excessive food and entertainment benefits from the financial consultants is an abuse of the public trust and perhaps violative of certain criminal laws, that conduct alone would not constitute embezzlement.”

Correction: An earlier version of this story misstated the day the charges were thrown out.